General Agreement on Trade in Services

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The creation of the General Agreement on Trade in Services (GATS) agreement and its implementation has been perceived differently in various regions as affected in terms of trade and politically investments into its signing. The agreement, facilitated by the WTO members, has seen changes in the service sector, cross-border flow of products and has opened up countries to enhanced trade practices. This discussion attempts to identify the principal purpose of the agreement and assess its significance in both the member countries and the business within these regions. In as much as the agreement has been lauded for accomplishing targets on opening up interactive trade within various regions, there are more aspects to this discussion past the intentions and achievements go GATS. By analyzing such issues, this study will examine how GATS has affected business and trade principles in various regions, its reception and the actuation of the principal purpose in relation to these traits.  

Through the examination of the dispute that the agreement poses a threat to service delivery and self-directed development, the discussion will assess the necessity of governance of access to essential resources by market forces. Additionally, there will be a consideration of how the agreement has covered service and product delivery since its assimilation into national policies with relation to its original objectives and priorities. These considerations will allow a more profound understanding of global trade in light of agreements such as this. The statement of the principal purpose of this agreement may be cited as the establishment of a framework of operational and functional codes of operation in trade (or services) for expansion and liberation of the markets of signatory states (Lynch, 2010). Its understanding is essential in the discussion of global trade, socio-political environments and the overall appreciation of the dynamics of trade as affected by the WTO. 

Objectives of the General Agreement on Trade in Services

GATS is founded on obligations that allow it to facilitate the goals set out by the participants in the agreement. These may include cross-border movements of service provided, these services themselves and the consumers, as promoted and allowed by the agreement and the members allowing trade (Lynch, 2010). To establish these aspects, it is necessary to examine the related dimensions of this definition of the bounds of the agreement, since they contribute significantly to the abilities of local governments in the regulation of international service supply and the privileges that these businesses possess


The members have to present their measures, responses, and requirements to other member’s requests, in a transparent manner. In as much as these members have national policies guarding local trade practice, they are obligated to allow applications for review of their markets in procedures that are allowable by local policy (Lynch, 2010). Administrative review by WTO may be provided on request when the local procedural requirements do not permit the release of information requested. 

The MFN Treatment

The member states extend to the services offered by other members, such that the treatment held toward local service suppliers is also available for other members operating within the countries in question. This facilitates the entry of service providers into markets extending across borders, such that the members have to recognize similar standards, requirements and licensing, and in this way facilitating the easier integration of economically vast service suppliers (Hoekman & Kostecki, 2001). Such treatment allows for businesses operating across borders to be protected.

The Necessity of the Agreement

Opening Up Countries for Trade

The removal of barriers to trade, as an overall principle of the agreement, was seen as necessary to increase opportunities for countries to trade in the service sector. In as much as policies on trade permitted international trade, local environments in these countries were limiting the entry of service supply. By accepting an all-encompassing agreement, the member countries of the WTO would open themselves up for more activity within their borders from other members (Hoekman & Martin, 2001). Additionally, it was seen as an advancement on the lifting of limitations based on the trading of goods into the service industry, and in cases where these two sects interact, by the facilitation of more trade in other sectors that are complemented by the service industry. 

Allowing Cross-Border Service Provision

Facilitation of the principles and requirements of the agreements would provide easier movement of service providers across borders with minimal changes to their operational policies. Through the facilitation of allowances in local laws on taxation, standardized requirements on business provisions, it would also allow the service providers to create an even business model across its borders operation, and through seamless transitions, such business would be viable internationally (Hoekman & Martin, 2001). The general idea, in this case, aimed at the removal of restrictions at borders that limited cross-border service delivery. 

Increasing International Cooperation in Trade

For countries to cooperate in trading in the service sector, the WTO had to offer provisions aimed at easing cooperation between countries in the formation and facilitation of businesses in the industry. In as much as the agreements require transparency, its existence alone is a gesture of goodwill by the member states in the facilitation of cooperation in business (Langan & Scott, 2014). Through interaction on the WTO forum, countries can form alliances that benefit the formation, financing, and advancement of businesses within the sector. 

Encourage Participation of Developing Countries in Supply

Since developing countries were seen as limited in the supply of services to the trading floor, the agreement would facilitate increased participation of these nations. Through the provisions of the agreement, the countries would have a more even ground for setting up and expansion of service provision businesses across the world. The forum itself offers a significant number of potential trading partners for the setting up of such industries and also, the conference itself would facilitate the general development of the same (Hoekman & Martin, 2001). The consideration was that the country entering into supply would majorly be a market for the product in light of competition versus returns, which the agreement standardizes for all nations. 

GATS as a Threat to Service Provision and Autonomous Development

In as much as this agreement has been considered facilitation for increased cooperation between nations in the service provision and development of business in the sector, it may also be seen as a threat to the increase in the same. Markets in this area develop based on their ability to cope with their operating environment, planning and business model. In this regard, what the agreement does is to limit the ability of the existing companies to proceed with their provision of services in light of changes in market policy and business model requirements (Langan & Scott, 2014). Adaptation of company operation dynamics to a market is essential to the continued growth of the same, and the agreement is seen as a limitation to the intended natural process of development of service provision in the global market. These aspects surround the possibility of the agreement being a threat:

Saturation of Market Players

With GATS offering increased participation for willing participants in service delivery, the agreement compromises on the formation of service supply industries, and in this way invites more suppliers into the industry. In as much as this aims at increasing business interactions internationally, it also allows for unlimited entry of market players, and in the ultimate sense, the market becomes flooded with service providers. This saturation is governed by the WTO, which has limited ability to control national business, and in this way, the market suffers in aspects such as fluctuation of prices, drops in quality and reliability of both suppliers and consumers (Taylor & Thomas, 2005). In this regard, the agreement not only excessively aggravates the situation of an intensively complacent market, but it also creates anarchy in the running of international business, in the scenario where national governments are limited in the government of standards and exercising of internal market control policies (Narlikar, 2005). All these factors affect both local and international consumption negatively and may lead to the collapse of some markets in the overall sense if national governments are unable to exercise control over their markets. 

Increased Product Delivery

Increasing the provision of services was among the aims in the principal purpose of the agreement, and in the nature of its intention, the requirement is only beneficial to a specific stage. In the timeline of this agreement, it is necessary to note that at one point, the increased delivery of services may become excessive, with the market forces being limited in the control of such delivery. In this regard, it becomes necessary to understand what changes would occur in the international service industry if every niche experienced an increase in supply. 

Without the interference of additional control policies, the consumers would have increased choice, the market would be more diversified, and interaction on a commercial basis would be positively increased across most countries (Lanoszka, 2009). On the other hand, with the consumers having a choice, supply would not only have to raise aggression in marketing and service delivery, but the market would also experience shifts in consumption trends based on the approaches taken by competing suppliers. This move would not only rock the global money market, but it would also increase the amplitude of fluctuations in prices, consistency in supply and demand. In the overall sense, the world market would also be at risk of collapse at different stages due to wild variations in market dynamics (Lanoszka, 2009). Such changes would not only increase risk in business; it would threaten new ventures and result in the collapse of the leading global companies involved. 

The Threat to Public Service Delivery

The opening up of the market to privatization and marketization of public service is a significant threat to the development and delivery of such services, eventually resulting in them becoming social entitlements. In situations that the market becomes so liberal that service providers can enter into service provision that substitute’s public service, the restructuring of these markets may occur, with the eventual takeover by the private sectors (Dunkley, 2004). With some of these services being essential, the privatization would result in a market governed by price and supply aspects of market forces and in this way posing a threat to service provision to those who are not able to pay. 

The Threat to Fair Trade

Fairtrade in the service industry is based primarily on the delivery of services by suppliers seeking profits and consumers paying within a reasonable range for such services. Under GATS, the market changes to become a commercially oriented market, since the international trade in service provision will result in the delivery of standard pricing (based on the business model of the supplier) (Doherty, Davies, & Tranchell, 2013). All these may lead to pressure from more financially potent consumption regions that eventually dictate the pricing and distribution of products to less profitable areas. Again, based on the business model of the international supplier, there may be a need for cutbacks on quality to match pricing, and this limits the existence of a natural effect of supply versus demand in fair trade. With such international business having the ability to curtail the influence of market forces over large geographical areas, consumers suffer the consequences of unfair trading and operations, primarily facilitated by the power of GATS and the limited effect of national policy on companies aided by the policies of the agreement (Morrissey & Rai, 1995). All these efforts limit trading on an equal platform for all market players

Surpassing and Substitution of National Legislation 

GATS may be seen as a substitute for national legislation, in particular with its disputes panel that holds hearings on business aspects within its influence. The commitment to this agreement to the member states was ensuring of increased trade possibilities through linearization and equal opportunity, and this panel aims at the establishment of such protocol (Morrissey & Rai, 1995). On the other hand, however, this board coupled with the legislation that strengthens the agreements abilities across borders may interfere with local legislative efforts in the limitation of certain trade policies and events. Also, based on the policy of transparency across member states, the legislation of the local authority must be open to the international agreement (Morrissey & Rai, 1995). Not only does this aspect counter prevailing commerce laws, but it also goes towards limiting the ability of local legislation to apply to businesses operating within international bounds and under the principles of the agreement. The liberalization attempts by WTO may be seen, in some cases, as a substitute for the local authority on service suppliers, and in this way limit the ability of local governance in the regulation of business practices. 

The Threat to Autonomous Development

Self-directed development of the service market is essential for natural economic growth and the interference of the GATS agreement limits not only the freedom of the local market but also its development. By regulating the international business operations in a country, the WTO not only interferes with the functioning of local business operations, but it also reduces the workability of businesses operating locally, which do not enjoy international privileges (Hoekman & Kostecki, 2001). Apart from the requirement of member states to facilitate international trade, the agreement also requires the transparent handling of legal issues surrounding these businesses. Local service providers are limited in this way, and their growth is restricted by the existence of superior competitors. Without the aspects of competition and superiority of quality and marketing having a less impact on the competitive edge between these two factions, the development of the local economic environment. 

Governance of Access to Basic Resources by Market Forces

Basic resource supply and consumption are subject to events in market dynamics, controlled by both market forces and government policies in play. The discussion of the necessity of market forces being allowed to monitor the aspects of supply and pricing as opposed to standardized measures to ensure equal opportunity presents various considerations. On the international forum for service delivery as dictated by GATS, market forces, the local legislation and liberal market play parts in the control of these aspects (Dunkley, 2004). The question in this case, therefore, becomes whether access to core resources should be governed or left to the dynamics of market forces. 

Commercialization of Basic Service and Resource Delivery

In the first place, it may be considered necessary to transfer public service delivery of essential resources to private companies since public control may not be able to meet standards of quality, cost-effectiveness in production and accessibility to the public (United Nations Conference on Trade and Development Secretariat, 2002). The move applies to resources such as water supply, where it becomes easier to regulate a private company or a government agency. The commercialization of the service provision lease to better service delivery and increased cost-effectiveness (and profits). On the other hand, in the case that the government control is limited, market forces may overwhelm the limits of price affordability of the consumers, and in this way, lead to significant dangers in the exploitation of consumers. The most viable approach to such a situation is the institution of a government-based agency operating independently on a commercial basis (United Nations Development Programme, 2003). Since the government is invested in the project of provision of the resources, it has the ability to control a significant aspect of market regulations. The prospect reduces the possibility of excessive aspects in pricing and quality in the discussed scenarios of market forces in full control.  

Cost Disadvantages 

On the international basis of delivery of essential services and resources, there are limitations in the exercising of limitations on both pricing and quality, since the consumption surpasses the jurisdiction of either government. In this regard, a different approach has to be taken in the analysis of such situations. Linearization of the market benefits larger consumers as compared to domestic users who would benefit more from government-based suppliers (Wilkinson, 2000). In this regard, on the international platform, it would be more suitable than the market for larger consumers to be privately based while domestic consumers are served on a public basis. Depending on local arrangements, this setup aims at the achievement of maximum service delivery that a government-based supply can achieve and the most commercial benefit achievable from a privatized supplier (Wilkinson & Scott, 2012). It however only applies to markets that can be differentiated, such as the provision of electricity to industrial areas and domestic consumption. 

In general, market forces can only be allowed full control of the dynamics of their services only in cases that the consumer has alternatives and the financial ability to shift resources in response to changes in market dynamics. In addition, the provision of services by a monopoly may result in disadvantages such as changes in demand for essential products (with unreasonable searches for substitutes where possible, such as energy) and general suffering of consumers without the ability to pay (Madeley, 1996). It eventually results in social imbalances and changes in the societal perception of the products on offer. In this regard, market forces cannot be allowed to wholly control the dynamics of supply and quality of essential products on both international and local scale. 

International Policy on Market Forces Vs Basic Service Delivery

Market forces cannot allow the achievement of ideal supply situations where the cost of provision of the essential resources limits access by both commercial suppliers and agencies. These are commonly left to governmental and international institutions to provide these resources. Attempts by institutions such as the World Bank and the United Nations to liberalize resources have failed due to the limitation of global finance and issues of responsibility and accountability (Dunkley, 2004). In most cases, the available resources cannot be used to meet the demand of the population. In this regard, there is a need for implementation of economic developments on international platforms that facilitate the entry of commercial suppliers in such regions. In the general sense, market forces have to be simulated in these areas, especially in developing nations to motivate commercial suppliers to enter these markets (Hoekman & Kostecki, 2001). Also, governments should intervene to protect their citizens from unfair trade or exploitation due to dominant market forces. 

In summary, the attempts by the WTO in the facilitation of the implementation of the agreement have been aggressive, to the point that suppliers in the service industry have the ability to operate freely across borders subject to the agreement. In as much as some of the aspects of this agreement pose threats to the national status of the service industry, there are benefits achieved globally with respect to opening up of markets for both operators and consumers. In as much as the agreement has accomplished targets on opening up interactive trade, there are more aspects to this discussion past the intentions and achievements go GATS. Some of the discussed issues border on the unreliability of an open market, which may be the eventual result of liberal trade in the sector, and the discussion of these events reveals an understanding of the stability of the market for governments, suppliers, and consumers. With respect to the liberalization of markets on an international basis, it is possible to understand the impact on essential resources offered by profit-seeking providers. Based on the discussed implications of such market policies being accepted by national governments, it is possible to predict price fluctuations and the inability of sections of the populations affording these basic needs.


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